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Attorney Jelani D James: “5 Things You Need to Know to Survive and Thrive During and After a Divorce

One: Have faith, remember and believe that things will get better with a positive outlook. Two: consider whether the emotional and financial costs of investigation is worthwhile. Three: Educate yourself on cryptocurrency and other emerging financial technologies if they are involved in your divorce. Four: Pay attention to the manner in which, you manage your assets. Five: Maintain your relationship with your attorney.

Approximately 20-million people own cryptocurrency, a digital form of money that was founded back in 2009. Cryptocurrency is virtual and lives in cyberspace. It is not something you can physically hold in your hand like the cash you carry in your wallet. Another fact about cryptocurrency, while the American dollar is regulated by the government, cryptocurrency is not. It is considered alternative currencies because it is based on algorithms that are validated by a blockchain. Confused? Many people are. Cryptocurrency is a tangled web that can throw a monkey wrench into a divorce because it is difficult to trace, and it is also difficult to determine its exact value. Jot this down too, “crypto” means secret so if a person wants to keep wealth concealed from their spouse, cryptocurrency could be where they are banking it. Jelani D. James is a Maryland based lawyer and runs into the crypto obstacle constantly with his clients. Panitz: What exactly is cryptocurrency? Jelani D. James: Cryptocurrency represents the complete overhaul of the financial sector, instigated by citizens rather than financial institutions, which has already impacted our society forever. Over 21 million consumers in the United States alone currently own cryptocurrency and the number continues to grow every second. Ilyssa Panitz: Why? Jelani D. James: The term, “cryptocurrency” is meant to describe the encrypted nature of our current iteration of digital currencies. Cryptocurrencies are digital and non-physical assets, which generally function based on public domain software, decentralized communication protocols, hash functions and other cryptographic primitives such as opensource public-private key cryptography standards, and community governance. In the most basic sense, these assets are represented by “coins” or “tokens” (the term used for individual units of measure that are part of a cryptocurrency supply). Each coin, like a single physical coin or dollar bill, has an equal value and is 100% fungible. Ilyssa Panitz: What does that mean? Jelani D. James: Fungibility means that items are mutually interchangeable. These coins are held in digital wallets, which are software that are associated with and control a set of private keys, identified with unique IDs and passwords, which are unrecoverable and must be privately stored and maintained, except as stored by third-party cryptocurrency exchanges. Cryptocurrencies record coin ownership history via records system called a blockchain, which is an un-regulated, completely independent, and immutable records system generally used for the purposes of confirming ownership of an asset. Transactions can only be added to the blockchain once ownership of the cryptocurrency to be traded is authenticated, negating the risks of fraud, and thereby ensuring all transactions that make it to the blockchain are legitimate. This has engendered widespread support and adoption of blockchain technology, in both government and private sectors alike, worldwide. Thus, cryptocurrency, beyond the amorphous connotation of the seemingly ethereal casino or trading floor (take your pick), which pops into many of our heads at the thought of the term, is a largely unregulated accounting, banking, and exchange marketplace. Ilyssa Panitz: How big of a role is cryptocurrency playing in people who want to get divorced? Jelani D. James: We’re seeing a lot of people exponentially increase their net worth overnight. As we all know that scenario can lead to new sources of strife, or fan already existing flames. With the surge of participation within the cryptocurrency space, recently surpassing $2 trillion in total value, cryptocurrency has become an increasingly important asset class, when speaking in terms of division of property. Depending on your spouse’s level of sophistication, cryptocurrency may pay a large role in your divorce. Furthermore, it is important to understand the value of the cryptocurrency in question. In addition, if you are the recipient of any of the cryptocurrency after division of property, maintaining ownership of your former spouse’s cryptocurrency versus selling may mean a large difference in value. Ilyssa Panitz: Why is it so popular? Jelani D. James: Part of the popularity of cryptocurrency, particularly as seen with Bitcoin, is derived from the nexus of interaction between consumerism and our society’s current obsession with fads. However, the vast majority of consumer confidence is due to technology. Regardless of the industry, technological innovation tends to quickly, and rather soundly, outstrip previous technologies in terms of application, incentivization and popularity. We are seeing this occur in relation to cryptocurrency, indicating that blockchain currencies are to fiat currency as steel was to iron. The revolutionary aspect continues to develop through further policy and technological innovation, including the possibilities of decentralization, community governance of monetary policy and communication protocols (guaranteeing access to funds), and finite supply (meaning no risk of inflation), resulting in an increasingly attractive alternative to traditional banking. Knowledge and acceptance of the financial medium continue to grow on a daily basis. Protection against inflation, the novelty of which has been highlighted by the pandemic, is also becoming increasingly important to consumers as we consider its role in our now seemingly perpetual relationship with creditors, as well as our ever-growing national debt. Ilyssa Panitz: Why did the Pandemic play a role in this? Jelani D. James: During the pandemic, we have seen rapid inflation, potentially nearing hyper-inflation, due to a panoply of strains on the economy. As we have attempted to counteract the human impact of those economic strains, including unemployment, hunger, and homelessness, we have opted as nation for the only solution on the table at the time –stimulus checks. Although altruistic in intent and valuable in their real tangible impact on lives, stimulus checks do create inflation. This is due to the fact that increasing the money supply by printing checks decreases the value of each individual unit of currency already in circulation. Therefore, investors and savings account holders are incentivized, at minimum in the short run, to turn to dollar alternatives due to volatility. Ilyssa Panitz: That is why people like this cyber money so much? Jelani D. James: Cryptocurrencies provide users with the ability to freely choose a currency that forbids the creation of new coins, thereby avoiding inflation, or to disregard its effect based on their personal financial policy values. The key is agency, autonomy, and self-determination, and the beauty is that no decision to hold a cryptocurrency is necessarily final as most cryptocurrencies are freely exchangeable. This change comes upon us after a general shift coming out of 2020 from activity in the stock market to heavy buy-ins on bonds, and then from bonds to the cryptocurrency market, effectively leaving the fiat currency, based stock market with less activity. Retail buyers continue to follow online community trends, while many veterans have chosen to simultaneously double down on short positions, effectively moving activity from the stock market to the cryptocurrency market, and thus weakening the viability of fiat currencies and the dollar’s position as the leading world reserve currency. The importance of this shift cannot be overlooked as the dollar’s position as the leading world reserve currency is another important aspect of the stability of its value and, therefore, consumer confidence. With this gold standard also comes military security. Currently, mainstream transactions must run through the SWIFT network. Cryptocurrency does not possess this limitation. In fact, if anonymity is desired, it is largely possible. China has started to capitalize on this to circumvent economic sanctions through the development of its digital yuan, a centralized, government-backed token, enjoying freedom from SWIFT and the consumer confidence inspired by government backing. Its development could lead many of the United States’ current political adversaries now facing sanctions to use the digital yuan to avoid the economic ruin Venezuela is experiencing, which could lead to further deprioritization of the dollar and its implosion. For those using cryptocurrency, such prospects are not daunting as they can feel security in their independent form of banking. Ilyssa Panitz: Is it easy for people to hide cryptocurrency? Jelani D. James: Anonymity was a key factor which attracted users to Bitcoin and created a significant portion of its initial value but, although secrecy is possible with cryptocurrency, complete anonymity is not the reality. For example, Bitcoin uses a semi-anonymous ledger to record transactions involving Bitcoins. However, the ledger itself is publicly available. Thus, because every transaction involves a wallet ID, if you are able to identify a crypto-to-fiat transaction involving the same wallet ID you can then examine the transaction records to determine the identities of the participants. Of course, there are many steps which may be taken to further separate a user from identification, but these are only taken by users who are truly motivated by secrecy and possess the technological savvy to understand and effectuate such systems. Ilyssa Panitz: How does someone go about trying to track and locate it? Jelani D. James: Start by checking out your spouse’s tax returns and bank statements, as well as any other financials for money market funds, business cash flow, credit cards, loan applications, and net worth statements. In addition, if your spouse owns or rents physical storage, housing, or a boat that could house wallet credentials, it is wise to look there. Ilyssa Panitz: Do lawyers face obstacles when cryptocurrency comes into play? Jelani D. James: There are numerous challenges at hand, requiring varied expertise and an ability to understand overall scope coupled with minutiae, which make cryptocurrency investigations potentially expensive and labor-intensive. When dealing with hidden crypto assets, it is important to have a foundational cryptocurrency understanding in order to identify the selection of experts, including blockchain-forensics professionals and tax professionals that will be the most useful in the process. Forensics professionals can analyze ledgers to identify transactions which may be tied to your spouse, while accountants will be able to consult on cryptocurrency gains and losses tax reporting as well as net worth statements and loan applications. In fact, cryptocurrency activity is generally taxable and requires reporting. This is not simply limited to instances in which, money is removed from a cryptocurrency trading platform. If your spouse has purchased an NFT, there is a federal tax reporting requirement. Likewise, has received payment in cryptocurrency, simply traded a coin for another type of coin, used their cryptocurrency staking income to make purchases from retail vendors, or indeed removed their value by trading their cryptocurrency for fiat currency, they are required to report such activity via IRS Schedule D and/or Form 8949. Commonly held digital assets will also be reported, such as cryptocurrency participation rewards programs, which may provide a backdoor to full identification and access. However, whether your spouse is compliant with tax regulations is another story. It is also imperative to understand the methods users employ to mitigate their own risk of loss of access to funds. Multi-signature wallets, exchange accounts, password vaults, physical vaults, safe deposits, single hardware wallets, and other tools continue to develop as the demand for recovery increases with stories of lost wallet passwords in the face of tremendous gains. Ilyssa Panitz: What is cryptocurrency worth? Jelani D. James: Cryptocurrency value, like stock, is determined by consumer confidence in the market. It is currently highly speculatory, but, interestingly, due to consumer determination of value and monetary policy, cryptocurrencies have the tendency to spike repeatedly, thus creating the recent influx of newly wealthy investors. Each cryptocurrency is built on a premise which governs its operation and contributes to its value. Bitcoin was built on the narrative of added anonymity envisioned to be a digital representation of gold as the “sovereign store of value”, meant to replace issues created by fiat currency’s lack of a gold standard. Ethereum, another popular cryptocurrency and network, was coined as the “world’s distributed computer”, based on consumer willingness to contribute computing power in exchange for Ethereum.Shiba Inu, a new favorite, focused on centralization of cryptocurrencies and exchange platforms, which Shiba Inuidentifies as the commonality in all recent trading freezes that prevented consumers from cashing out cryptocurrency for fiat currency during cash rushes. Ilyssa Panitz: Who uses cryptocurrency more: men or women? Jelani D. James: Not sure of the statistics in a definite sense. If marital assets are used to purchase cryptocurrency, is the other side entitled to 50%? Yes, generally speaking, all purchases made with marital assets are to be considered marital assets, but the final distribution of assets is not always simply a 50/50 division of each unit of property. This question is further complicated by issues of separate and community property, which vary from state to state, so competent representation is important in order to argue for your fair share. For example, separate property is often re-classified as community property due commingling and other issues. In addition, further complication arises where there is marital waste. If the losses incurred were intentional, then their qualification as waste is obvious, but the generally, absent of evidence of intentional waste, the question is whether the cryptocurrency investments made are to be considered negligent investments amounting to marital waste, and largely turns on your spouse’s overall investing habits and depending on the totality of the assets and the state where your divorce is adjudicated, your fair share may be the entirety of the available cryptocurrency rather than half. For example, in a situation where during your marriage your spouse started a business, whose value exceeds that of the cryptocurrency as well as its future project value and is beyond your realm of expertise such that you could not operate it alone and the circumstances of your divorce are such that you are unable to work together as jointly owners of the business, you may be best suited to an award of the cryptocurrency in full. Ilyssa Panitz: What are some warning signs that your spouse is hiding cryptocurrency? Jelani D. James: If you know your spouse is participating in cryptocurrency but you are unaware of your spouse’s wallet ID and password, try asking for their credentials. If this presents an issue, there may be a possibility that your spouse may be inclined to conceal assets. Ilyssa Panitz: Can you find it on bank statements since you need money to invest in crypto? Jelani D. James: Bank statements will provide you with evidence of activity on trading platforms, however they will not identify the wallet that is being used or any other useful information in terms of tracing or recovery. However, exchanges generally track the IDs, which function as addresses, of the wallets involved in each transaction processed on each exchange. This is the most viable method of evidencing transactions and beginning the process of identification of the total value of a wallet. Ilyssa Panitz: What if you have your spouse’s wallet credentials? Jelani D. James: If you have access to your spouse’s wallet ID and password, your path to recovery is much simpler. You will simply need to create your own wallet and provide your spouse’s and your IDs to the court. Upon order by the court, you will process a transfer from your spouse’s wallet ID to yours. Ilyssa Panitz: What are 5 things someone needs to know to survive and thrive during/after divorce? Jelani D. James: One: Have faith, remember and believe that things will get better with a positive outlook. Two: consider whether the emotional and financial costs of investigation is worthwhile. Three: Educate yourself on cryptocurrency and other emerging financial technologies if they are involved in your divorce. Four: Pay attention to the manner in which, you manage your assets. Five: Maintain your relationship with your attorney.

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